Housing Crisis: We need the parties to embrace Living Rents

How to increase the number of genuinely affordable homes available in England has become one of the most urgent and widely-discussed policy decisions facing the new Government.

It’s easy to see why. For decades, the UK has failed to build enough homes. Current rates of housebuilding in England are around half of what the country needs to meet demand. The high cost of housing means that housing costs push an extra three million people into poverty every year.

Increasing the number of homes is vital. But to make a real change to the dysfunctional housing market, we need to look at the kinds of homes which are being created too. Demand cannot be met by the market alone, so increasing the supply of social and intermediate housing is critical. But a shift in recent years has seen Government investment focused on building homes for sale, rather than increasing the number of homes available to rent.

This has contributed to a huge increase in the number of people living in the private rented sector (PRS) - the most expensive and least secure form of tenancy. This is increasing poverty levels and making it harder for people on low incomes to find a secure, long-term home. Higher rents in the PRS are also pushing up the cost of Housing Benefits, as taxpayers foot the bill for higher cost, but often lower-quality, private housing.

Social and affordable housing has the potential to provide a solution, but under the current system new rents for this tenure are directly linked to the private housing market which those on low incomes can’t afford to access. JRF research has shown that continuing to set social rent rates nearer to market rates will push a further 1.3 million people into poverty by 2040. We need to change the system.

Living Rents, a system which would break the link between rent levels and the spiralling cost of the PRS or property values, is one way of achieving this. Under this system, rents for social housing would be set at 28% of the lowest quartile earnings in the local area, rather than being set as a percentage of the high private rents which most social tenants cannot afford. Linking rents to incomes like this is the only way to bring housing costs into line with what low income households can genuinely afford. It would allow people on lower incomes to find a stable home, and could have a positive effect on the wider housing market through relieving pressure on the PRS and on homes available for sale.

We need action to bring down the cost of rents down, but we also need to increase the number homes available. The last week has seen positive news on both of these fronts, with Mayor of London Sadiq Kahn announcing his own London Living Rents scheme and the Welsh Government unveiling its target to create 20,000 new affordable homes, including 14,000 for rent.